Salt Lake County has 'tight' apartment vacancy rate, report says

Market conditions for property owners will continue to be favorable over the next year, although vacancy rates may see a slight rise due to the completion of several new apartment communities over the year.—Kip Paul

SALT LAKE CITY — If you are a landlord in Salt Lake County, then you are likely enjoying a robust rental market. If you're a renter, it's a different story.

Finding a decent place to live was not all that easy last year and has become a bit more expensive this year.

A new report released by Cushman & Wakefield Commerce shows that the vacancy rate for apartments in Salt Lake County is currently just 3.9 percent, compared to a rate of 3.8 percent last year.

However, rental rates climbed 4.4 percent over the past year with the combined average monthly rental rate for all types of apartment units rising to $850.

The report surveyed rental and vacancy information on mid-size to large apartment communities in Salt Lake County, which comprise approximately 370 apartment communities ranging from 25 units to 588 units.

The market remains very “tight” despite the development of new units, said Kip Paul, executive director of investment sales for Cushman & Wakefield Commerce. Vacancy rates for studio, one- and two-bedroom one-bath units declined over the past year while vacancy rates for two-bedroom, two-bath and three-bedroom units increased slightly, he added.

The report showed that all types of apartment units experienced increases in average rental rates.

“The Salt Lake City apartment market is growing stronger each year and vacancy rates continue to remain low year over year,” Paul said. “Market conditions for property owners will continue to be favorable over the next year, although vacancy rates may see a slight rise due to the completion of several new apartment communities over the year.”

Vacancy rates will remain below 5 percent, Paul predicted, while a slight uptick will likely occur with the completion and lease-up of several new apartment communities.

Nevertheless, there is little threat to overbuilding as the market has easily absorbed 5,300 units built in the last three years and the planned projects in 2014 will not destabilize the market, he said.

Rental rates will continue to increase modestly, moving up 3 to 4 percent over the next year, Paul said.

Rental rates increased from $0.94 per square foot in 2012 to $0.97 per square foot in 2013 — a 3.2 percent increase. Rental projects of 250 units or more registered an average per square foot rental rate of $1.01 and a vacancy rate of 4.3 percent.

Apartment communities on the east side of the metro area have slightly higher rental rates than communities on the west side, the report indicated. Currently, the average rent per square foot for an eastside property is $0.99 compared to $0.95 for a westside property.

For those projects built since 2000, overall square foot rents were $1.00, while the monthly rental rate was at $981, the report showed. The average rental rate for a two-bedroom, two-bath unit in an apartment community built since 2000 was $1,023.

In 2012, nearly 1,700 new apartment units received building permits. The new units increased the county rental inventory by only 1.4 percent, Paul explained.

Currently new apartment construction does not pose a threat to the rental market, he said. With the addition of 21,000 jobs to Salt Lake County, the threat of overbuilding remains low and new projects will not destabilize the market, he noted.

“The state of the Salt Lake area market remains robust and investors continue to benefit from the available properties and low vacancy rates,” Paul said.